To put it bluntly, investors are concerned about the future of investing. With a trade war with China looming overhead, most are checking their cell phones or the television with trepidation each morning in fear of what might have happened overnight. Losses are accelerating, and the world is on edge, but there are ways to navigate the stock market safely in a sticky situation.
Stick with the Known
When it comes to investing and depositing funds, the current market is prone to fluctuations. Goldman Sachs chief U.S. equity strategist, David Kostin, suggests sticking with dividend growers, companies with low labor costs, and domestic-facing service sectors. In other words, stick with stocks that have proven immune to trade wars.
High dividend-yielding stocks like AT&T are usually steady during tough times. In contrast, companies with low labor costs like Facebook and Netflix will tend to do quite well “as wages remain a margin headwind,” Kostin revealed in an interview with CNBC. Service companies aren’t nearly as sensitive to tariffs as goods companies, so investing in Disney, Wells Fargo, and McDonald’s is a wise choice.
Stick with Domestic
Kostin noted that “70% of the revenues of U.S. companies are domestic, so while tariff is an issue, it’s concentrated in some industries and some sectors [more] than others.” Adding up the facts, it appears the take-home is that domestic service companies are a solid bet if you’re a betting man right now. Utility and telecom companies are good examples, as is Amazon.
Companies like Apple, on the other hand, won’t fare as well. Service-providers like Google and Microsoft have more stable gross margins. Apple, with billions in sales overseas in China, is much more exposed to any retaliation China dishes out.
Hard Times at Home
Automakers have been hit especially hard by tariffs and will likely continue to struggle. GM, Volkswagen, and BMW have plants in the U.S. and depend on China for sales and parts. Many have had to raise prices on vehicles they sell in China as a result of earlier U.S.-imposed tariffs.
Meanwhile, farmers and retailers are facing their own set of challenges. The U.S. government has already provided billions in aid in an attempt to soften the blow. Warren Buffett, chief executive of Berkshire Hathaway, told CNBC that this trade war “is bad for the whole world.” It seems he’s right, as usual. With time and patience, though, the whole world will recover.